Shareholders of Bank Negara Indonesia (BNI), the country’s fourth-largest lender by assets, on Monday approved a plan to separate the bank’s sharia banking division to better tap into the hugely lucrative sector.

The separated unit, to be called BNI Syariah, will be equipped with a paid-up capital of Rp 1 trillion (around US$104 million), BNI president director Gatot Suwondo told a press conference after the company’s extraordinary shareholders’ meeting.

BNI will control a 99.9 percent stake in the company, contributing 99.9 percent of the investment needed — around Rp 999 billion. The remaining 0.1 percent will be covered by the bank’s insurance unit, PT BNI Life Insurance.

“With the separation, we hope BNI Syariah will be more independent and aggressive in looking for business opportunities,” Gatot said.

The bank is now in the process of waiting for permission from the central bank to transfer assets and employees to the new company. It is expected that BNI Syariah will be officially independent by early next year.

BNI’s decision to separate its sharia unit is part of the bank’s strategy to tap into the largely underdeveloped sharia market in the world’s largest Muslim population.

With more than 85 percent of Indonesia’s population being Muslim, sharia banking has not fully developed here yet in terms of assets.

But while sharia banking accounts for only around 2 percent of the national banking market share, growth in this area has been phenomenal.

Over the last five years, sharia banking has posted an average growth of 34 percent annually in terms of loans, funds and assets. That’s above the rate of growth in conventional banks, whose growth in credit and funds stood at 25 percent and 19 percent, respectively, over the same period.

According to the latest data from the central bank, five banks in this country have thus far separated their sharia units to forge independent companies, with a total of 654 sharia branch offices as of August.

Meanwhile, the number of banks with sharia units stood at 24, with a total of 262 offices.

Indonesia’s Sharia banks have aimed to increase their share in the national banking market from 2 percent to 5 percent by 2011.

According to the latest data from BNI, BNI Syariah will soon be listed as the biggest sharia bank in the country.